Dive Brief:
- Zenefits, the highly-touted HR benefits startup, is missing its "aggressive" revenue targets and is curbing expenses, reported the Wall Street Journal -- making Zenefits the latest venture-backed company to struggle to meet high investor expectations.
- Due to missed sales targets, Zenefits froze some departments' hiring, cut pay and fired dozens of people, including at least eight executives since the summer. Mutual-fund giant Fidelity Investments marked down the value of its investment in Zenefits by 48% between Aug. 1 and Sept. 30, bringing the $4.5 billion valuation to $2.34 billion.
- But a Zenefits spokesperson told the WSJ that Zenefits is seeing massive demand from small businesses seeking simplified HR solutions, and that they will be "quadrupling" their "annual recurring revenue over the past 12 months."
Dive Insight:
Zenefits is notable in the HR space due to the niche it attempts to fill in benefits administration. It was previously considered the "fastest-growing" subscription-software firm in history by its founder, entrepreneur Parker Conrad. But Zenefits is starting to face considerable competition from various newcomers, including Flock, which recently announced it is teaming up with business solutions giant ADP, as it enters maturity.
Zenefits was founded in 2013 and largely serves as a health insurance brokerage company despite calling itself a software firm. They give away their HR benefits management software to small businesses so that those businesses streamline their benefits sign-up process. In turn, Zenefits receives a commission for each "insured life" companies sign up through their program.
Some HR departments reported serious bugs in Zenefits software, while other customers are pleased with the service, telling WSJ that Zenefits "worked out well beyond our expectations."
